Republicans say they're behind a payroll tax holiday for 2012. That's a good start, but it's only half-way to the December stimulus we need.
After months of threatening to block another payroll tax break, Republican leadership now says it supports a $250 billion plan to cut Social Security taxes. That makes it a virtual guarantee that the typical family will get to keep an extra $1,500 of its earnings through 2012.
Or does it? Somebody has to pay for this thing -- unless we agree to put it on the national credit card. That means both parties need to find $250 billion lying around. The GOP wants to find the it in spending cuts. The Democrats want to find it in a new "millionaire tax."
The showdown over offsets isn't a sideshow. It is the show. If the parties finish December at loggerheads over paying for the payroll tax break, it won't happen. Instead, there will be another blame game. Democrats will say Republicans blocked a tax break for every working family to protect the richest 0.5%. Republicans will say Democrats insisted on raising taxes on job creators in a recession. Those arguments sound way too realistic for me to believe the payroll tax cut is a done deal.
Let's assume it is a done deal. Is it even a good idea? The payroll tax cut for workers goes like this [ed: skip to the end of this section if you truly hate numbers]. Every year, the government keeps about 6 percent of your wages for Social Security. In 2011, the feds only kept about 4 percent. The point was to make you 2 percent richer. Democrats want to extend and expand this tax break by taking down the Social Security to about 3 percent and putting employer payroll taxes at the same level (the Social Security tax is shared by employers and employees). The upshot is that a family making $50,000 a year would would keep another $1,500, and businesses would have higher cash piles to make hires and investments.